Target Corporation is a leading departmental store in the U.S and is the second largest business in the industry after Walmart. Target brand has undergone several changes s ince 1 903 when George Dayton founded it. The first store was opened in 1967 and became the highest paying division under Dayton’s Hudson Corporation in 1970. It continued to expand throughout the country and introduce new outlets under Target Brand in 1990. The parent company rebranded to Target Corporation in 2000. Currently, the company has over 1800 stores in the U.S and operates different business formats including discount stores, hypermarkets, and flexible outlets. Target is renowned for quality and a focus on the young image-conscious customers (Target, 2017). The purpose of this paper is to look at strategic management by Target Corporation from the perspective of a consumer.
Business Activities
Target Corporation is a leading retail store that operates in the competitive retail industry where there are other established companies competing for the market share. Target offers its customers essential, fashionable and differentiated merchandise at discount prices (Target, 2017). The company delivers a preferred shopping experience using its supply chain and technology. Target is devoted to innovation while offering loyalty products using a disciplined approach that manages the business and enhances its future growth. The company operates as a single segment that is designed to allow its customers who are referred to as guests to buy products seamlessly using digital channels or retail stores.
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Target sells a wide selection of general merchandise as well as food. The merchandise stores offer food assortment including dry grocery perishables, frozen items, and dairy. The digital channels offer a wide assortment of merchandise which includes items offered in retail stores and complementary items which are only sold online. A significant portion of the company’s sales is from its national brand merchandise. The company has owned and exclusive brands which constitute a third of its sales. It competes with internet retailers and traditional retailers and has positively differentiated its self from other retailers and provides compelling value to its customers (Target, 2017).
Target Corporation has for long been a place that reunites people. The company is determined to help its customers to discover joy in their lives by offering new outfits, making weekly target runs, and supporting community projects. A customer shops with the company knowing that they can expect more not only through experience and product offering but also through high standards held by the company. Target has for long invested in the community in its corporate social responsibility where it donates 5% of its annual profits (Target, 2017).
Factors in the General Environment
Target has strong working relationships with the different countries that it operates or sources its materials like China. The company also enjoys widespread support at the state and local level. However, it is affected by tariffs, taxation and trade restrictions. The economic conditions affect the profitability of the company. During recessions, for example, customers price match and are likely to buy products from Walmart which are sold at a lower price. Similarly, seasonality affects the performance of the company since a majority of its sales are in the months of November and December due to the holidays. The interest rates, exchange rates, demand and supply, and inflation affects the performance of the company (Mellahi & Frynas, 2015; Target, 2017 ) .
Different social factors like the buying habits, lifestyle, gender, social class, family size and structure, population growth and age distribution have a significant influence on the company as they affect the target market and the overall performance of the company. Technology has also opened a new avenue for online sales contributing significantly to the company's sales. Similarly, social media and digital marketing have expanded the reach of the market. The company is also affected by the legal and environmental factors in each state and country where it operates (Mellahi & Frynas, 2015; Target, 2017 ) .
Competitors
The main companies that directly compete with Target include Walmart which is the largest retailer. Another major competitor is Costco. The two and Target provide a wide range of products in addition to maintaining a complex inventory management system. The companies sell their products at a relatively cheaper price and depend more on staple consumer goods like clothing, food items, and household products ( Hussey, 2012; Target, 2017). Competition in the industry is strong and the retailers must maintain a competitive edge through creative methods and strategies. The disposable income of the consumer and the general economic condition affects the sales and profitability of the companies in the industry.
The profitability of the companies depends on their ability to thrive in the competitive environment. The customers for Costco and Target have high incomes and spending power preferring to spend more on designer products as well as quality products. Walmart, on the other hand, focuses on low prices thus attracting customers with lower disposable income. Target continues to emphasize low-cost designer fashion and high-quality merchandise (Target, 2017). Costco targets affluent customers who are not affected by the recession. Target and Costco compete directly for affluent customers but also consider the prices of Walmart. The ability to grow in future depends on the prospects of connecting with customers and maintaining large margins.
Rivalry in the Industry
Target Corporation operates in a very competitive industry. Competitive rivalry is high due to the presence of large players like Walmart, Costco, E-bay, and Amazon. The entry of foreign brands and other influential brand names has complicated the market. The industry has high competition on price, quality, location, customer service, and selection. The number of stores held by each company and their geographical location affect the profitability of the company. The growth rate in the industry is also slow and, the return on investment for most companies has remained relatively lower than the industry average rate. There are few switching costs in the industry (Rothaermel, 2016) . However, the intense competition does not affect the profitability of the company due to its ability to focus on a unique market.
An industry with strong rivalry leads to a decline in the commodity as companies compete with each other on price. Target has differentiated its products and developed a strong brand name that has enhanced its ability to overcome the intense rivalry in the industry. The company has also built its scale, therefore m anaging to compete in the marketplace (Target, 2017). The company has also expanded its market size thus boosting its economies of scale. Target has also managed to develop loyalty programs in addition to price merchandise and convenience.
Substitutes
Threats from substitutes are high, and competitors like Walmart have identical products that are low cost. There are low switching costs that the consumers face in the industry. There are few retailers offer an assortment of products like groceries, pharmacy services, clothing, automotive and electronics due to the barriers to entry into the industry ( Hussey, 2012) . Substitutes are therefore offered by established companies that try to capture a competitor’s market. Target has mitigated the threats of substitutes by differentiating its products and having its branded products. Similarly, it has established its stores in central locations with high traffic in addition to engaging its customers through online channels (Rothaermel, 2016) . The target can address threats posed by substitutes by being service oriented and understanding the core needs of its customers instead of focusing on what the customer is buying. The company can also increase the switching costs and enhance its loyalty programs.
Company Resources
The company has both tangible and intangible resources that enhance its ability to compete in the market. It has a dynamic human resource which has contributed to its current standing and ability to compete in the industry. The company has reputational and innovation resources which have given it an upper hand in the market giving it an edge in quality products for the target market. The company is also known for innovative merchandise and product design (Target, 2017). Some of its products are costly to imitate while others are rare. The company has the ability to capture its value and differentiate its products.
Target strategy has three main components; focusing on design through high quality as well as stylish designs. The company also ensures that the store atmosphere is enjoyable having a friendly team and a clean environment. The stores also have feel-good details on its sides (Target, 2017). The company has capitalized on innovation to delight its customers.
Target is committed to five key points which include delighting its customers through the “ expect more pay less” promise. The second point is through the creation of a workplace where the employees are valued and where they can excel in their work. The third option is to pursue strategies that generate high returns. The company also focuses on demonstrating leadership in its governance. Lastly, the company concentrates on improving the health and strength of the community (Target, 2017).
The products offered by the company are designed by a competent team that completes the entire process in 90 days. The management and employees have to continuously come up with creative ideas. The company also sells products from top designers who have proved to be profitable. It promotes its sales through its credit and debit card. The use of local marketing strategies has proved to be instrumental to the success of the company (Mellahi & Frynas, 2015) . Target has also promoted the notion that its customers are in a similar club to the Costco customers. The resources of the company meet the criteria to be considered core competencies due to their ability to promote the company and enhance its competitive advantage. Similarly, the competitors find it hard to capture some of the markets or to use the same strategies.
Potential Strategy
The company should pursue a focused differentiation strategy by offering unique features that meet the demands of its market segment. It should concentrate its efforts on different sales channels and use social media and digital marketing to reach its current market and potential customers. Target should pursue uniqueness and take this approach to the next level. The unique features of its products should be specialized. The adoption of focus differentiation will provide long-term success (Mellahi & Frynas, 2015) . Similarly, the company should remain focused on its current offerings in addition to expanding the existing product lines. Concentrating on the current products will enhance the competitiveness of the company and its ability to counter the external pressure exerted by its competitors. The company should also develop strategies that enhance the brand name and dedicate its resources to building strong brands.
Target Corporation is a renowned brand that has successfully used its strategies to overcome the competitive pressure from other companies like Walmart and Costco who are the main competitors. The industry has a high rivalry as the leaders try to outperform their competitors to capture their market. The products offered by the company have close substitutes which customers can use in their place. Target also has significant resources that are valuable and rare. The resources should, therefore, enhance the capability of the company to use focus differentiation strategy to continue enjoying its competitiveness and to realize high-profit margins. Similarly, it should build a strong brand name and offer unique features in its branded products.
References
Hussey, D. (2012). Strategic Management . Hoboken: Taylor & Francis.
Mellahi, K., & Frynas, J. (2015). Global strategic management . Oxford: Oxford University Press.
Rothaermel, F. (2016). Strategic management (3rd ed.). New York: McGraw-Hill Education.
Target. (2017). Item 1. Business: 10-K Part I: 10-K Report: Target 2017 Annual Report | Target Corporate. Retrieved from https://corporate.target.com/annual-reports/2017/10-k/10-K-Part-I/Item-1-Business
